In the history of the financial markets, we have experience possibly hundreds of bubbles, from the tulip bubble all the way to the recent Web 2.0 bubble. The question is, how to you spot the top of the bubble, and get out before it’s too late? Truth is, it’s impossible to catch the top. Near the end of a bubble investors are in a maniac demeanor, hence it’s impossible to predict how long and how far the bubble can keep going. Just because the markets are in a bubble doesn’t mean they’re anywhere near the top of the bubble. However, here are some FUNDAMENTAL signs to watch out for.
When we hear news about the economic crisis and jobs being cut, we usually think of burly manufacturing men standing in the unemployment lines. Most don’t think of skilled professionals having too hard of a time getting back on their feet during times of economic duress. Surprisingly, one of the industries losing jobs at an astonishing rate is the public school system. With all of the talk of needing more educated students, taxpayers aren’t willing to shill out the extra cash for teachers to keep their jobs. Here are some reasons why investing in a teaching degree may be a bad idea:
In an upcoming post, I’ll explain that understanding market sentiment and the psychology of other investors in the market is far more useful than technical or fundamental analysis in a bear market. Here’s a wonderful chart of investor sentiment during a bear market. Look below to the right.
In this post, I will detail out exactly what each of these market stages are, and how investors are feeling (what the sentiment is) during each of these market stages. Through understanding psychology, one can predict how other investors will react to certain market events (because human psychology is the one thing that never changes, unless we stop being human).
At this stage, many investors are feeling good about themselves and the markets. It’s been a while since the markets touched bottom, and a lot of people have forgotten that equities were once deemed as “dead”. The public begins to buy (albeit not too much, afraid that stocks will fall), believing the propaganda from the main stream media proclaiming that stocks will go higher, Higher, HIGHER! A few market analysts are calling a bubble, the general atmosphere amongst investors is optimism. The market data is all good.
This is when things really start to roll. Good times are in, and the public becomes accustomed to buying ever increasing stocks. Most investors are buying with both hands now, believing that stocks have yet to double and triple and quadruple. In other words, bubble on! Risk on! A few of the smart investors and hedge fund managers, contrarian to popular belief, believe that it’s now time to short equities and pop the bubble. But of course, no one listens to them, because no one wants to be a disciple of bad news. Market data, of course, comes in with corporate earnings report consistently beating the previous ones.
My friend John Tate over at johntate.weebly.com digitized the book When Genius Failed. He agreed to allow me to sponsor his efforts (for $80), and in return, I get to share this online books with my blog readers, for free! Here is a summary of the book. Alternatively, go to the bottom of this post to read the digital version of this book right now, for free.
Another month has passed. Wow. That was fast. This has been somewhat of a crazy month for my investments (it’s September, the markets come to life again!), hence aside from writing more posts, I didn’t really get the chance to work on anything else related to blogging such as SEO or design. That’s why I hired a few freelancers on freelance.com to create a new logo and work on SEO for me.
As you can see, my traffic fell over a cliff from last month’s, but it’s still up there!
What’s new about Investorz’ Blog.
We got a new WordPress Theme! I really like my old one, because the design was really decent, but more so it was really easy to use. If you miss the old design, I captured a screen shot of it before I switched to the new theme. Click here. The new theme is Standard, and what I like about it is that there’s more customization choices, but the design that comes prepackaged is really nice and easy to use. There are options to customize Standard, but I’ll probably hire a professional to do that for me in the future.
This is an issue that I’m still struggling with. I’m sure everyone will at one point in their life struggle with this, because there are always times when we start believing that being ourselves isn’t good enough. Ever since we were young, adults would tell us to be ourselves. “Just be yourself, and everything will be ok.”
But will everything be ok? Not always. There are two scenarios: one where you need to be yourself, and one where you need to fight against yourself.
When to be yourself.
Remember in high school, when the popular guys would be the ones that spent all their time on dates, listening to concerts, going to the movies, and doing all the “cool” stuff?
I have a lot of thoughts on investing I want to share with you guys. As you may know, I prefer to write long posts, and none of these individual thoughts take a long time to describe. So I’ve decided to group these thoughts together into Random Thoughts on Investing – September 2011. You may or may not agree with my thoughts, but that’s ok. It’s always good to read about others’ opinions. In the comments section, I hope to read your opinions too about my thoughts.
There are old investors, and there are bold investors. But there are no old and bold investors (all the old and bold investors are dead!).
Investing is all about risk management (we’ve all heard about that before). Know you’re level of risk comfort, the experts say, which is true. But there’s no way I’d cover all of this within a few paragraphs. There are entire university degrees devoted to understanding risk management. Anyways, the basic principle is that it’s better to control your risk than to go after a wildly profitable (and wildly dangerous) investment opportunity. If you lose 50%, you’re going to have to earn 100% to make that money back.
Please be patient with us right now. We’re updating the design and look of Investorz’ Blog. New theme, new logo, and that’s pretty much it. Hope you enjoy the new design! The theme is almost finished, and the new logo already has (plus favicon).
So what do you think? Do you like the new look, or the old one?
Wow. The recent version of GMO’s Insight’s are quite amazing. GMO is run by legendary investor Jeremy Grantham, and his latest insights on the real estate markets in China and the U.S. are definitely worth a read. He goes over the major underlying factors that determine housing prices, and also provides an analysis on the current housing situations in these two countries. I downloaded the document for you, so enjoy reading!
So do you agree with his view on the real estate markets?
Commodities are mostly shunned by the average investor, for some reason or another. Investing in commodities simply isn’t as popular as investing in stocks (God knows why). But what many fail to realize is that investing in commodities can be far more profitable (or far more unprofitable) than investing in stocks. Let me first tell you a little bit about my experience with investing in commodities.
As you might guess, the first commodity that caught my attention was the almighty bling. Gold. It was 2008, when the “Gold 1000″ chant was raging. A habit that my mother gave me was to always take a few months to study a market before actually investing in it. So I looked at it. I looked at the technical charts. I looked at those charts some more. And based on the factors of resistance at the 1000 barrier, and an ever weakening economy, I shorted gold (actually, I shorted a gold ETF) at around 920. I held onto my short position for 3 1/2 months, and I made a bundle. My next experience with commodities was far more profitable. It was in silver. Amongst commodity investors, silver is shunned more often than gold, for reasons I don’t know. Silver’s volatility far exceeds that of gold, hence trend investors like me love the silver market. I bought 100% into silver in September ’10, and as you can guess, I more than doubled my money in the following surge in silver prices.